1. Field of the Invention
The present invention relates generally to the commodities industry. More particularly, the present invention relates to a system of aggregating small risk holders into a product that can be hedged using traded instruments.
2. Description of Related Art
The commodities markets are highly variable, putting products and transactions associated with them at risk of adverse price moves. This problem was somewhat mitigated with the invention of options and futures on commodities. These products allowed an era where large corporations could offset risks in the financial markets. The products are sized such that only large risk takers have access to these markets. Later came exchange traded funds (ETFs), exchange traded notes (ETNs), and instruments associated with them. These products, while allowing smaller risk holders to hedge, are not as efficient or liquid as the options and futures markets they mimic.
Another problem with options, futures, ETFs, ETNs, and the associated markets is the complexity of the products. Due to this complexity, the markets and the government limit who can make trades. These limitations take the form of margin requirements, minimum contract sizes, and in the case of the government, strict disclosure that one understands the risks of trading these products.
Therefore, what is needed is a system that aggregates small risks into a product that is hedged in the options and futures markets.